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Post of the Day
August 25, 1999

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Subject:

Re: Dirty, understocked, scattered inventory HD'

Author: iko

To preface my msg, I work for a company that sells a great deal of product to HD and it's competitors. I have personally spent thousands of hours working with HD. I have worked with many of their people, from hourly associates to asst. mgrs., store mgrs., district mgrs., and to a limited degree, a few of the buyers. I also have experience dealing with its competitors, from it's largest (Lowe's) to it's smallest, local independant hardware stores.

Home Depot's stores run with an incredible degree of autonomy. A store manager can litterally, adjust prices in her store, change certain aspects of the store layout, etc. Stores vary greatly depending on the quality of management. I've seen "C" stores become solid "A" stores in less than 2 months, and I've seen "A" stores become "C" stores. This easily happens with change of store level management. Some managers have a hands on approach and some delegate all responsibility to assistant managers or in some cases dept. heads. One isn't necessarily better than the other as long the people with the responsibility are quality people.

To be fair, it is this autonomy that produces inconsistant shopping experiences, but ALSO produces the best managers and talent from those who are allowed to approach their jobs from an almost entrepreneurial (sp?) perspective.

A sales rep can go into Home Depot, get a particular form, put together a purchase order, and have ANY asst. mgr sign off on it (even one who has no responsibility over that particular dept.) Their managers (asst. and store) are TRULY empowered to run their store. They're also TRULY held accountable. If you make too many blunders, or if your departments falter, you can quite easily be demoted -- and yes I've seen it happen many times.

Personally, I like HD's model. I think the problem they're having is that due to their EXTREMELY rapid expansion, they are pulling people from within (a good thing I think) into levels of responsibility that they are not ready for (a bad thing.) Then they need to go through the ropes, allowed to learn from their mistakes and so forth before anyone can decide whether or not they should be at that level. I respect HD for allowing people to succeed, be promoted, fall, and get back up again and learn. I also understand that with their rapid growth they have little choice.

Lowe's is a much more centrally run company. Therefore the Lowe's experience tends to be much more consistant and there are less decisions to be made (and therefore less impact by that managers particular style or opinion of what a store should look like.)

A Lowes is SUPPOSED to be clean, and mgr's are held accountable for keeping it that way. HD is supposed to be a warehouse and if the manager wants to run a high volume warehouse with stackouts and displays that people have to practically trip over to get down the aisle, he does so. (BTW, there are many arguments FOR the loads of stackouts littering the aisle.) If the HD mgr wants a clean store, he cleans it up and holds his people accountable for keeping it that way.

For those who think that HD and LOW will put the independant retailer out of business -- I wouldn't count on it. Associates at independant stores are *generally* more knowledgeable and provide MUCH better service. The boxes will only extinguish those indpendants which aren't already competitive. If you're an independant and survive the initial shakout, you're better off now, for the most part, than before the big boxes came to town. Also many of the independants have shifted their focus towards the commercial customer (which spends MUCH more anyway) who isn't served very well by the big box model.

Most of my peers feel that while HD is certainly the leader, LOW has much more growth potential, is easier to shop, and is a HUGE threat to HD. Most of us feel that store associates at both aren't very knowledgeable about their products. It's is the opinion of many of us, that given the choice of HD and LOW side-by-side, most people would rather shop LOW, especially female customers.

Personally, I own both HD and LOW. I own them b/c of new store growth, not COMP growth. New store growth is where the stock appreciation will come from. When they stop building stores at a high rate I will sell them. I hope this post adds some insight to these businesses and the industry.

Just my $.02